Imagine a situation when the Startup venture you nurtured over the years scales up, makes it big, and eventually becomes a Unicorn. As the Startup founder, you will be on cloud nine, invited to forums and seminars to spill your success story and share your experience on Unicorn investment. Once your Startup turns into a Unicorn, you are viewed as the epitome of success. Once you are a Unicorn, you are deemed to get the limelight, magnified branding, and brand imagery that your venture always needed.
Industry and academic research define Unicorn as a privately owned startup with a valuation of $ 1 billion. Aileen Lee first introduced the word ‘Unicorn’ for startups in 2013, and is used ever since. Although Unicorn companies are known to do good for society, there are growing controversial views about Unicorns. Some experts believe that growing Unicorns is good for society, improving technological pace and innovation and reducing the unemployment gap. In contrast, others believe the higher number of Unicorns is creating a bubble in the industry.
On that note, let us understand what percentage of a Unicorn is worth joining.
Unicorn Investment
India is witnessing and welcoming a flurry of Startups in a fast-paced and ever-changing dynamic environment. India stands as the 3rd largest community for Startups globally, with nearly 77,000 Startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) as of August 2022. India is ranked 2nd in quality innovation promoted by top Indian Universities and agencies. To give you a holistic understanding of Indian Startups, 13% are from the IT sector, 9% from healthcare and life sciences, 7% from education, 5% from food and beverages, etc.
As of September 2022, India accounts for 107 Unicorn companies with a combined valuation of $ 340.79 billion. It is interesting to note that Unicorn investment is unique yet rewarding. The number of Unicorns in India increased whopping 66% YoY growth. Out of the total Indian Unicorns in 2022, 44 with a combined valuation of $ 93 billion emerged in 2021.
The Startup culture and ecosystem in India are encouraging and progressive as compared to other emerging countries across the globe. You need to note that Unicorn Investing attracts funds to sectors like EdTech, FinTech, logistics, FoodTech, Ecommerce, Supply Chain, and HealthTech are some of the prominent ones.
Some prominent investors in Unicorn companies are Sequoia Capital, Tiger Global Management, Better Capital, Inflection Point Ventures, Blume Ventures, Alpha Wave Global, 9Unicorns, Accel, etc.
Unicorn Investment term
Although becoming a Unicorn is the ultimate target of any Startup company, the journey is tough and challenging. However, you need to be aware of the Unicorn Investment term. These terms are as follows:
- Venture capitalists view Unicorns as a company with a valuation of $ 1 billion, and any less valuation does not qualify to become a Unicorn. A privately held Startup can only become a Unicorn.
- There is a commitment of funds for the long term, and these investments are not so liquid.
How much does a Unicorn cost
It is worth iterating that out of all the Startups in India and globally, a billion dollar funding and eventually becoming a Unicorn is not easy but worth the struggle. Statistically speaking, any Startup has a probability of 0.0006% becoming a Unicorn. To reiterate, 3 out of every 5 million Startups eventually become a Unicorn. The odds of not becoming a Unicorn are high. If your next question is How much does a Unicorn cost? It is ideally a costly proposition, as a billion-dollar valuation will eventually come from several rounds of funding and a sizeable injection of capital over the years of your Startups.
Multiple here denotes the gross return on invested capital. Industry research and statistics suggest that globally at the end of 2021, the median multiple on investment in early-stage Startups was nearly 31.4x. Out of these deals, the median multiple of investment that eventually became a Unicorn was 9.4x at the end of 2021. Although the multiple of investments in early Startups is higher, the multiple of investments in those Startups becoming Unicorn is lower. Many Startup companies also fail and wind up as they fail to keep up with the pace along with liquidity and solvency issues.
You also need to understand that not all investments made into a Unicorn Startup are the same. It varies in magnitude and the type of sector it intends to serve. For some sectors like public welfare initiatives, there is support from the Government in terms of fundraising.
The multiple on Unicorn Startup skewed towards it being higher in the pre-seed stage and falling out in seed and later-stage deals.
How to invest in Unicorn Companies
Cash is the king, be it a Startup or a Unicorn company. Each of them needs funds for short-term and long-term solvency and liquidity positions. Thus there is a lot of demand for value investors, and investors have many options to choose from, be it a Startup or a Unicorn company, to park their funds. But the question is, How to invest in Unicorn Companies?
Investment in Startups and Unicorn companies varies across stages and types. Here we denote the different stages of investing in companies from the point of view of an investor.
Seed round of Investment:
Startup founders seek funds from friends and family as the venture is still at its nascent or embryonic stage. The early stage investment is done when the company or the Startup venture is on paper.
Angel Investment through angel investments:
Wealthy investors and High Networth Individuals (HNIs) invest and inject funds into Startups or promising ventures in smaller amounts. Funds are needed to scale operations or as a part of working capital.
Venture Capital Investments:
Wealthy investors and venture capital firms pump in money as a part of their investment as the venture grows to scalable heights with a proven business model and success record. Investors earn in multiples once the venture goes public through the IPO route.
If you are a wealthy investor or a Startup founder, investment in Unicorn companies materializes in the following way:
- A unique platform, Let’s Venture, helps an investor to find suitable companies to invest.
- An investor can also get in touch with a Unicorn company’s promoter and senior leadership and express the desire to invest.
- Seminars, investor events, and Startup events help bridge the gap between investors and companies seeking funds.
Tyke Invest is one such platform that converts community into capital. It helps you as the Startup founder to leverage from the community, thereby fueling the growth of your venture in quick succession.
Tyke Invest is one of the first Indian platforms and the best for Startups to raise funds from a community of investors, incubators, mentors, and industry experts. While Tyke Invest helps you in your fundraising rounds, you focus on your core business activity.
